Oil futures tilted lower on Tuesday as traders wait to see if relations between the U.S. and Saudi Arabia sour further following the disappearance of a journalist in Turkey.
Worsening tensions between the two nations could result in a curtailment of global crude production from one of the most significant members of the Organization of the Petroleum Exporting Countries.
West Texas Intermediate crude for November delivery on the New York Mercantile Exchange CLX8, -0.17% shed 20 cents, or 0.3%, to $71.58 a barrel, while December Brent crude LCOZ8, -0.07% was up 6 cents, or less than 0.1%, at $80.84 a barrel on ICE Futures Europe.
Read: Here’s why oil isn’t rallying despite U.S.-Saudi tensions over missing journalist
Crude had rallied early Monday on tough rhetoric from U.S. President Donald Trump on the consequences should the Saudi government be found to have been involved in the disappearance of the journalist, Jamal Khashoggi, from the Saudi consulate in Istanbul, as well as implied threats from Riyadh over the impact that could have on global oil markets should the U.S. impose sanctions.
Both sides later cooled rhetoric, with Trump suggesting that “rogue killers” may have been involved. However, news reports said the Saudis were considering saying that Khashoggi had been unintentionally killed during an interrogation, according reports.
While such a declaration “may do little to quiet widespread suspicion that Crown Prince Mohammed bin Salman was behind an assassination plot, it could leave enough room for the U.S. and others to generally maintain diplomatic ties with the Saudi government,” said Robbie Fraser, commodity analyst at Schneider Electric, in a note. “That’s easing most concerns that Saudi Arabia could use its oil exports as a weapon against potential foreign sanctions, though that risk was limited under any scenario.”
Craig Erlam, senior market analyst at Oanda, said Trump clearly is “very reluctant to enter into a tit-for-tat with a key Middle Eastern ally.”
In other oil-related news, a monthly report from the Energy Information Administration on Monday projected crude output from seven major U.S. shale plays would rise 98,000 barrels a day in November to 7.714 million barrels a day.
Meanwhile, the American Petroleum Institute, an industry trade group, will release its weekly estimate of U.S. crude inventories late Tuesday, while the EIA’s more closely followed report will follow Wednesday morning.
Reduced refinery run rates and slower demand, likely exacerbated by a pair of hurricanes in the past few weeks, are likely to result in a rise in inventories, said Robert Yawger, director of energy at Mizuho Securities, in a note.
In other energy trading, November gasoline RBX8, +0.85% was up 0.7% at $1.957 a gallon, while November heating oil fell 0.2% to $2.321 a gallon. November natural gas NGX18, +0.28% edged down by 0.2% to $3.237 per million British thermal units.
Read: Natural-gas prices set to heat up just as temperatures start to fall
Also see: Here’s what Trump’s ethanol plan means for farmers, refiners and motorists
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